Software companies are postponing debt deals as rising borrowing costs and increased lender scrutiny weigh on the sector, even as growing pressure from artificial intelligence threatens their business models.

Firms in the United States and abroad have already paused or delayed fundraising, with lenders and investors bracing for AI to disrupt the industry,
according to Reuters, citing industry sources.

These worries are reflected in loan markets, where spreads for riskier companies are rising in anticipation of more defaults. AI-related uncertainty also hit private capital manager Blue Owl, whose shares fell after it sold $1.4 billion in assets to return cash to investors.

“We expect AI disruption risk to be increasingly reflected over 2026 to early 2027, particularly for lower‑quality credit sectors with elevated refinancing needs — and more so in the U.S. than in Europe,” said Matthew Mish, UBS’ head of credit strategy.

According to the report,
Leveraged loans, especially in the U.S. tech sector, are beginning to factor in higher default risks. UBS forecasts defaults could climb 3 per cent to 5 per cent under faster market disruptions, above the market’s expected 1 per cent to 2 per cent rise.

“The disruption is going to play out over two years,” Mish said. “We ultimately think that the market will price in a majority, but not all of the defaults that we’re forecasting.”

Even firms with stronger, less AI-sensitive debt are pausing market activity until trading stabilizes, a banker said.

AI-related disruption is affecting leveraged loan deals more than high-yield bonds, two anonymous bankers said.

Technology borrowers—60 per cent of them in software—make up the largest share of leveraged loans, according to Brendan Hoelmer, head of U.S. default research at Fitch Ratings.

Tech loans represent 17 per cent of the leveraged loan market, totaling $260 billion.